The concept of negative numbers is formed along with the concept of zero.
The concept of negative numbers is formed along with the concept of zero.
Negative numbers are based on two ways of thinking.
One is that they are numbers positioned in the opposite direction of positive numbers with zero as the base point.
Another way of thinking is that they are numbers that result in zero when added to another number.
Negative numbers are virtual numbers, that is, they are imaginary or conceptual numbers. Negative numbers can be defined as virtual numbers formed by determining a certain standard. The standard point is zero. Therefore, negative numbers cannot be formed unless the concept of zero is also formed. This is a comparatively new concept. Whether numbers are positive or negative is decided by where the zero or base point is.
In the imaginary space where positive and negative numbers exist, the rule is to put a minus sign in front of a number that results in zero when added to another number.
The number that results in zero when added to 5 is -5, and the number that results in zero when added to 10 is -10.
In addition, subtracting a negative number means adding a positive number.
-1 squared results in 1.
These two ways of thinking have an important meaning in the field of economics.
Positive and negative numbers are formed depending on the question: what point should be regarded as zero or the base point, in other words, what point should be regarded as the level of the base point.
In the field of economics, this is the basis for the relationship called a zero-sum or zero-base.
If a zero-sum relationship is formed, it means that there are inextricably linked nations or economic entities.
Economic structures can be seen by looking into the zero-sum combinations or relationships of nations.
For example, the sum of the current account is zero.
Reducing the deficit of a nation whose current account is in the red means reducing the surplus of a nation whose current account is in the black.
If measures are not formulated with this as an assumption, such measures are ineffective. The current account is the value that represents imbalances among nations in the form of monetary values.
It is necessary to think that a group of unemployed people in a neighboring nation is very risky in terms of the nation’s defense. As long as imbalances among nations exist, there is no end to disputes among nations.
Peacekeeping is fundamentally an issue of the economy.
In the world of physics, there are specific things corresponding to negative numbers.
For example, they are negative force (a reversed force), negative potential, negative position, velocity, acceleration (a reversed position, velocity and acceleration).
In contrast, in economics, the monetary value is the foundation. The monetary value is an aggregate of natural numbers. Basically, there are no negative numbers.
Instead, a negative position exists in the monetary space based on double-entry bookkeeping.
In the monetary space, values in a negative position function opposite to the values in a positive position.
A negative value is always set in combination with a positive value of the same amount at the opposite side.
A negative value results in zero when a positive value of the same amount is added to it.
A negative value is a virtual or nominal value.
Money is a value functioning at a negative position.
Therefore, the monetary value is expressed as an absolute value, i.e., as an amount.
The essence of non-convertible paper currency is the numeral value functioning at a negative position.
The basis of the economy is decided by the amount of commodities produced, the amount of currency distributed and consumer demand.
The market is like a reaction inside a reactor. It is moved by a chain of transactions. If these transactions consist of only exchange transactions, settlement transactions and capital transactions, no added value is generated. To create added value, profits must be generated through profit-and-loss transactions.
What is important to economic policies is whether or not a measure causing an income shift is a measure causing expansion and reproduction.
Income shift, that is, income redistribution, enhances the efficiency of funds, but it does not proliferate the value. To proliferate the value, measures that stimulate reinvestment, that is, expansion and reproduction, become necessary.
For example, if money is only saved, or used to repay borrowed money, or used to pay taxes after funds have been provided in the form of subsidies, such money does not have actual effects on economy.
Furthermore, if the money is funded through national credits, it would directly result in increasing the national accumulated debt.
In short, if you want to turn the economy around, what you need to do is to enable companies to make profits. However, in a recession, that is difficult for companies to do. The cause is found in the relationship between stock and flow.
Economic issues fundamentally come down to a question of stock (fixed) and flow (floating).
The periodical profit and loss principle sorts out the stock portion and the flow portion. Before that, the cash principle was widely adopted.
The problem is the balance between stock and flow. How much currency is being circulated? How much stock is being accumulated?
In companies, stock forms the borrowing and lending portion, and flow forms the profit-and-loss portion. Stock forms a long-term function and flow forms a short-term function.
In family budgets, disposable income forms the revenue portion.
What are the factors that impact disposable income? They are the repayment of long-term loans, and the payment of social insurance fees and taxes.
The meanings of these terms are problematic. They mean the accumulation of past borrowings, social obligations and taxes.
For example, when a family budget has a regular income, long-term debt such as a car loan or mortgage is possible. When a family budget shoulders a long-term debt, the disposable income is suppressed by the repayment of the debt. But, it is offset by the rent and the hardship is mitigated. The long-term debt is gradually accumulated and disposable income is further suppressed. When income increases can be expected to some extent during inflationary periods, the pressure is alleviated. On the other hand, in times of deflation, salaries decrease and it becomes difficult to sustain the family budget. If a stable income becomes no longer possible under such circumstances, bankruptcy may be the last resort.
The same can apply to companies. When the focus is on periodical profit and loss, the balance among profits, expenses, assets, debt and capital is lost and only debt balloons. While profits are not secured, fixed costs and accumulated borrowings increase. Disposable money and money used for investments decrease.
Due to excesses in facilities, hirings and borrowings, a company’s expenses may not match its profits. If the company tries to cover the portion that does not match profits by borrowing, the assets it can put up as collateral will be insufficient. Because of this, the company will have difficulties raising funds. In the end, it cannot secure profits. Even if it can report a profit in accounting terms, it would face a shortage of funds which could lead to bankruptcy. This would be considered a “black-ink bankruptcy.”
Commodity prices are determined by the money supply, turnover and interest rate.
Money exerts its effectiveness when it is used, that is, money exists to be used. The present money economy is established on the premise that money is used.
For this reason, money is used as soon as it is supplied. In other words, money is supplied and circulated as a result of being used.
The essence of money is its function. Money is a mediator for that function. Money is useless if it is just held and not used. What is even worse, its value decreases.
Money is supplied as income. Money is paid as soon as it is supplied. Payments are classified into consumption, investment and saving. Saving is considered to be the act to saving money, but, in fact, saving is the act of lending money to financial institutions. Monetary value decreases with time because it has a time value. Thus, commodity prices are a function of time.
The value of money for something like a gold coin which has a material value is not influenced by time. On the other hand, the value of money for something without material value, such as representative money including paper currency and coins, decreases with time.
For this reason, the premise of money is that it will be used as soon as it is supplied.
Under such a monetary system, the amount of the supply and turnover determine the commodity prices. The system is established with the premise that the total money supplied in the market will function.
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